Taxable income is exactly what it implies. It is that portion of income that is subject to income taxes and other legislatively defined taxes. The Internal Revenue Service defines the calculation that determines income to be taxed. In general income that can be taxed is net income calculated by subtracting allowable expenses from gross income. Deductions on personal tax returns can be itemized per Internal Revenue Code 63 or a standard deduction per code 63(a). In addition there is a set of personal exemptions allowed which also reduces the amount of gross income subject to income and other taxes. Taxable income for businesses is the net of business income less allowable business expenses. Taxable income can be generated through earned income, asset sales or capitalizations, dividends, and other miscellaneous revenues.